The next corn battle

The boom in corn acres is great news for the West. But how much will it hurt growers in the East?

“When (farmers) do the economics, corn adds a very viable income to their operation.” – Doug Alderman, Pride Seeds. Photo:
File

For years, there’s been one great truth in Canadian agriculture. East is East, and West is West. So it’s little surprise there’s a sense of worry about the growth of “eastern” crops, especially corn and soybeans, in the West, and the way that markets and processors may adapt to the new geography of those crops.

The story started changing in a big way in Manitoba in 2001 when growers added nearly 50,000 acres of soybeans to their rotations. Last year, Statistics Canada reported Manitoba growers seeding 2.3 million acres of soybeans along with 410,000 acres of grain corn.

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For 2018, corn acres rose 4.4 per cent in Manitoba to 428,000 acres, while soybeans dropped to 1.9 million acres, a drop of 17.5 per cent. Saskatchewan also saw a sharp drop in soybeans, falling 52 per cent to 407,500.

The trend in soybean acres had seemed logical: try some acres, get burned on some, re-evaluate, try some more…

But the picture seems different for corn. Or is it?

Projections for corn production in Western Canada run as high as 10 million acres, and a few analysts suggest it could reach upwards of 26 million, a figure that was cited by some as far back as 2013.

Increasingly, that optimism is being tempered by concerns about infrastructure, including storage facilities and processing plants, and analysts today are often suggesting the crop will find its home somewhere around the five- or six-million-acre level.

But even they, to some extent, admit that there are a lot of unknowns in the mix, and they point out that 20 years ago, few in agriculture could have foreseen today’s yields, consistently topping 140 bu./ac. in parts of Manitoba and 110 in many other areas.

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That may be enough to entice many growers to add corn in their rotations. Furthermore, it’s not just Manitoba that’s adding corn to cropping plans: farmers in southeastern Alberta and western Saskatchewan are irrigating their corn, reducing moisture as one of the primary limiting factors.

There’s still some hesitation, of course. Have those big yields come from unusually good weather, or are they at least partly due to improvements in genetics, and to growers simply getting better at growing corn?

The next big jump

When talk of corn’s migration to Western Canada comes up, Doug Alderman, vice-president of sales and marketing with Pride Seeds, near Chatham, Ont., hears all sorts of comments, some pertaining to impacts on markets, others from growers in the East worried that the seed companies are chopping their eastern research programs in order to the chase the 70- and 72-day hybrids needed to break open the West.

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The former isn’t a factor — one industry stakeholder suggested that if Canada stopped growing corn, the resulting impact on the Chicago Board of Trade price would be mere pennies and might last 30 minutes before returning to normal. The companies say the latter is also untrue: breeding and development efforts for Eastern Canada continue at the same pace and with the same focus on maturities as well as on agronomics and on disease and pest resistance packages.

Even a lack of processing or infrastructure in Western Canada is of little concern to Alderman, who adds that there are some distilling and ethanol processing opportunities in Manitoba. Storage could be an issue, since most farmers are unfamiliar with handling the volumes of grain common with corn harvest.

It’s also a possibility that Western hog production could rebound due to increased corn production, since corn is seen as the gold standard for feed. It’s an accepted belief that if livestock producers could get a consistent supply, corn would be their preference.

In the end, growers can always ship corn south of the border. A two-hour drive from most parts of southern Manitoba and Saskatchewan can put a kernel of corn relatively deep into North Dakota or Minnesota. And if there’s one thing Western farmers are good at — besides growing their crops — it’s moving the harvested product.

“But if they’re a corn grower and they’ve made up their mind to be a corn grower, they’ve invested in equipment and logistics,” says Alderman. He notes there are demographics to show that older farmers tend to resist adding corn to their rotations. “Those who have that next generation coming forward, that next generation wants to try something new, and when they do the economics of it, corn adds a very viable income to their operation.”

That’s been a well-known fact in eastern Canadian agriculture for years: corn helps soil structure, soil health and it helps boost yields. And that’s the same with any rotation — the more, the better.

“When you look at the interest in acres and the demographics, there are a lot of farmers who are interested in expanding corn acres in the next five years, and they’re already growing corn,” says Alderman. “There are also a lot of growers who are interested in starting to grow corn in the next five years.”

If there is a reluctance, it’s in the investment required with planting (or seeding), growing and harvesting corn. Secondary to that is the concern with weather conditions. If all goes well with spring seeding, and if the summer sees warm temperatures and timely rains, all will be well. But if the weather is unkind, growing corn can be a roll of the dice.

Still, there’s plenty of room for optimism. Although corn for silage and grazing will take some of the acres on the Prairies, the bulk of the growth in corn production, be it one million or 10 million acres, will be for grain corn.

“Silage and grazing will expand acres, but the main growth will be grain corn,” says Dan Wright, corn and soybean portfolio lead with Monsanto Canada. “Unless you have livestock, silage is not an option and we don’t see a huge increase in cattle. Plus silage has a high percentage of water, and water is really expensive to truck.”

Wright echoes many of Alderman’s statements about the potential for expansion, noting the sense of anticipation surrounding corn and recognizing the crop’s potential, adding that although 26 million acres seems too high, it may be short-sighted to say “never.”

Monsanto representatives note, for instance, that growers are always looking for additional crops that can be grown profitably.

“What always impresses me about Western Canada is the entrepreneurship — you see it in the agricultural manufacturers that start in Western Canada,” says Wright. “Canola is also a great example of a crop that has grown from small acres to more than 20 million annually and with an infrastructure to support it, from crushing to exports.”

Wright believes that corn growers will see new businesses take advantage of the opportunities, and that stakeholders need to work with the industry to monitor what’s happening, how the market is growing, and where the industry is heading.

Western genetics head East?

When soybean genetics advanced to the point where it was not only feasible but profitable to grow soybeans in the West, one of the benefits for growers in Eastern Canada was the improved opportunities for double-cropping soybeans. It’s been suggested that shorter-maturity corn hybrids for the West might provide some kind of benefit for growers in the East —that improving 2200 or 2300 heat unit hybrids for Saskatchewan might create some plant health enhancements for the 2700 or 2800 heat unit region in Eastern Canada.

The challenge with that scenario is that unlike soybeans, corn is bred for more specific conditions with a focus on agronomics and pest and disease spectrums. For instance, Western Canada — like the northern tier states — has to deal with Goss’s wilt, which isn’t a huge issue in Eastern Canada. On the Prairies, growers have to contend with two types of corn rootworm — Northern and Western. That’s why the focus of western corn hybrid development is squarely on those conditions.

“There will be benefits that Western Canada will bring to growers in Eastern Canada, especially in the earlier maturity,” says Wright, adding that more farmland coming on stream in Ontario’s Near North will see some benefits. “But we already have a strong focus on these areas, and disease and growing conditions are different in heat unit regions such as 2600 to 2800 compared to 2200.”

The bottom line on East versus West corn production is that everyone wins: corn — and soybean — growth in Western Canada is based on innovation and opportunity for growers. And that will have a positive effect on Eastern Canada as it makes the entire country more attractive from an investment standpoint.

It’s more evidence of the developing trend that encourages growers to maximize profits on their existing acres, instead of buying or renting more land. Can that be so bad?

The profit numbers

According to private sector research as well as a spread sheet available from the government of Manitoba, corn’s impact on a grower’s bottom line is substantial, not just from an added yield-and-value perspective, but also from a long-term soil health outlook.

In a Manitoba presentation, a three-crop rotation (canola, soybeans and spring wheat) was compared to a four-crop rotation into which corn is added. Certain assumptions are made, including no change in commodity prices during the four-year rotation period, and the yields are consistent throughout — corn at 115 bu./ac., soybeans at 35 bu./ac., spring wheat at 55 bu./ac. and canola at 40 bu./ac.

Assuming a 3,000-acre farm and a three-crop rotation with canola, soybeans and wheat, and each with 1,000 acres, a grower could see gross revenues of $1.1 million and a net profit of $178,000.

By adding corn to that rotation — meaning a 750-acre configuration for a four-way cropping plan — gross revenue climbs to $1.129 to $1.235 million, and gross profit jumps to $203,000.

But it’s the long-term impact that’s also intriguing. After four years with corn in the rotation, canola yields are projected to jump to 50 bu./ac., soybean yields from 35 bu./ac. to 45 and wheat yields from 55 bu./ac. to 65. At the same time, corn yield jumps 20 bu./ac., from 115 bu./ac. to 135. In terms of gross revenue, it’s now $1.5 million and the gross profit jumps to $480,000.

Most of this rotation benefit is already built into farmers’ thinking in Eastern Canadian agriculture, particularly when winter wheat is also in the mix.

Now in the West, where pencils are equally sharp, the economics may be irresistible, and the experts are already saying that for smart growers in the East, it isn’t whether will more corn will be grown in the West. It’s how will you use marketing and management to protect and enhance your corn income?

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